The Republican Path to Prosperity has been mislabeled. Molded by House Budget Committee chair and fiscal wizard Paul Ryan, nearly everyone has called it “bold” and “courageous.” But in essence, the plan is sheer reality. It is a fiscal plan to address a real and looming disaster.
It is bold only in the political sense, wherein any move to change huge entitlements is immediately dismissed by those terrified of risking the loss of large voter blocks. Moreover, it changed Washington’s political agenda from spending money to saving money.
In 1981, the Economic Recovery Tax Act, the Reagan tax cuts of 25 percent across the board, pumped resources into production, boosted economic growth and defied critics who called it a give-away to the rich. Ever since those happy Reagan days, Congress—ruled almost exclusively by the Democrats—has abruptly turned away from any change in Medicare, Medicaid, or Social Security in quaking fright of the possible backlash from the old and the poor.
As a 1982 Congressional Joint Economic Committee study found: similar across-the-board tax cuts had been implemented in the 1920s as the Mellon tax cuts, and in the 1960s as the John Kennedy tax cuts. In both cases, the reduction of high marginal rates actually increased tax payments by the “rich,” also increasing their share of total individual income taxes paid. The Democrats at that time continued to play cry-baby “about falling tax payments by upper income payers,” even after IRS data became available showing a surge in income tax payments by affluent taxpayers.
The Ryan plan has tax changes just as sweeping as the Reagan tax reductions of 1981 and 1986. But perhaps more importantly, it lays out imaginative changes to the largest entitlements. President Obama’s budget proposal, in stark contrast, would accelerate the county’s plunge into a debt crisis. It doubles national debt by 2012 and triples it by 2021. It also imposes new taxes amounting to $1.5 trillion, proposes spending $3.73 trillion next year, and never brings federal spending below 23 percent of the GDP. Most importantly, Obama’s budget never touches, the so-called third-rail of politics—government health and retirement programs–the elephantine-size segments in the budget.
The Republican budget cuts $6.2 trillion in spending from the president’s budget over the next decade, reduces the debt as a percentage of the economy, and points us toward the path of actually paying off the $14.3 trillion national debt. The Republican plan: Do less for better. The Democrat plan: Do more for worse.
The Path for Prosperity was met with unsurprising immediate, but false, attacks from Democrats. Debbie Wasserman-Schultz, newly appointed by Obama to chair the Democratic National Committee, called the Ryan proposal a “path to poverty.” She said it was “trying to back out on our promise” to care for seniors. Chris VanHollen of Maryland, ranking Democrat on the House Budget Committee, criticized the plan as cutting aid to seniors and the poor while preserving tax breaks for the “super-rich and big business.”
Paul Ryan explained the Republican plan in an April 5 op-ed article in The Wall Street Journal. He wrote the reforms “will protect [not harm] health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature” of the Medicare subsidy threatens its solvency and creates “inexcusable levels of waste; its reforms will not affect those in or near retirement in any way. Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy.” Future Medicare recipients can choose a plan that works best for them from a list of “guaranteed coverage options…with increased assistance for lower income beneficiaries.”
Regarding welfare, Ryan wrote that the federal share of Medicaid will be converted into a block grant for states to give patients “more options and better care.” Reforms would change the food stamp program to end the “flawed incentive structure” that rewards states for adding to their rolls. It also “consolidates dozens of duplicative job-training programs into more accessible, accountable career scholarships” to better serve job-hunters.
Ryan said that a study by the Heritage Center for Data Analysis projects the Path to Prosperity will drop the unemployment rate down to 4 percent by 2015 and spur economic growth as he outlined.
The Tax foundation says that “serious attention” should be given to the tax side of the plan because “making the tax system conducive to long-term economic growth is just as critical to solving the nation’s fiscal crisis as reining in uncontrolled spending.” It said the plan repeals the three major tax provisions in the health-care legislation: tax penalties on businesses and individuals that don’t sign up for the government plan; the 0.9 percent surtax on wages and the new 3.8 percent tax on non-wage interest, dividends and capital gains, and new taxes on so-called “Cadillac” health plans.
The House Budget Committee’s own summary April 5 of the Ryan proposal set forth these additional facts and objectives:
In spending, it eliminates “hundreds of duplicative programs; reflects the ban on earmarks, and curbs corporate welfare; brings non-security discretionary spending to below 2008 levels; reduces deficits by $4.4 trillion…reaching primary balance in 2015;” and puts the budget on the road to paying off the debt.
On taxes, it “eliminates roughly $800 billion in tax increases imposed by” ObamaCare; “prevents the $1.5 trillion tax increase” in the Obama budget; calls for a “simpler, less burdensome tax code for households and small businesses” and lowers tax rates for them, with top rates at 25 percent.
On growth and jobs, “Creates nearly one million new private-sector jobs next year and results in 2.5 million additional private-sector jobs in the last year of this decade; increases “real GDP by $1.5 trillion over the decade; and unleashes prosperity and economic security, yielding $1.1 trillion in higher wages and an average $1,000 a year in higher income for each family.”
A key objective was listed as “restoring America’s exceptional promise” to ensure that the next generation “inherits a stronger, more prosperous America.”
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